Rising demand for crude oil is set to slow to a trickle within five years and peak before the end of the decade, as electric-vehicle uptake surges and developed nations rapidly transition to cleaner sources of energy, according to a prominent energy forecaster.
The International Energy Agency, a group funded by some of the world’s largest oil consumers, expects demand for transport fuels derived from oil such as gasoline will be the first to peak before heading into a steady decline–hastened by a sharp uptick in EVs and a long-lasting shift to remote working spurred on by the Covid-19 pandemic.
Rapidly growing Asian economies will continue to prop up the global appetite for oil in the coming years, and demand for jet fuel, naphtha and other oil products with industrial uses will continue to tick higher, the IEA said in a report released Wednesday.
But even in China, which has long been the powerhouse of global oil demand, the appetite for crude will slow markedly before the end of the decade. India will surpass China as the main driver of oil growth as soon as 2027, the IEA said.
The forecast, which the IEA made in an annual report that considers oil demand as far away as 2028, isn’t the first time the Paris-based group has laid out a timeline predicting a zenith for oil. But it envisages a far more rapid shift away from fossil fuels than previously expected–a shift that has been sharply accelerated by the Covid-19 pandemic and the energy crisis that followed Russia’s invasion of Ukraine.
“The shift to a clean-energy economy is picking up pace, with a peak in global oil demand in sight before the end of this decade,” said Fatih Birol, the IEA’s executive director.
The forecasts are based on sharply diverging energy trends between the developed economies of North America and Europe and rapidly growing developing nations predominantly in Asia. Demand for oil in the advanced economies that make up the Organization for Economic Co-operation and Development is likely to peak as soon as this year thanks to vast government spending aimed at reconfiguring economies away from fossil fuels, the IEA said.
Demand in that region is expected to decline to 44.3 million barrels a day by 2028 from its peak of 46.2 million barrels a day in 2023. Demand in non-OECD nations will climb by more than 7% between now and 2028, to 61.4 million barrels a day.
The outlook for oil demand looks sharply different in the near term as Asian economies, notably China’s, ramp up demand following the easing of pandemic-era lockdown measures. In a separate monthly report, also released Wednesday, the IEA lifted its forecast for oil demand growth this year by 200,000 barrels a day, to 2.4 million barrels a day.
China is set to account for 60% of that increase. Its demand hit an all-time high of 16.3 million barrels a day in April while India also saw its demand for gasoline and diesel hit records in May.
The IEA raised its 2023 oil supply forecasts by 200,000 barrels a day to 101.3 million barrels a day and it expects further supply growth of 1 million barrels a day in 2024. Still, supplies are expected to struggle to keep pace with demand at least in the near term, the IEA expects–a situation that will sharply tighten the oil market and could send prices higher.
Oil-demand growth will begin to ease as soon as 2024 however falling to 860,000 barrels a day next year, the IEA expects. Oil demand will grow by a further 1 million barrels a day in 2025 after which the rate will begin to cool notably, increasing by just 700,000 barrels a day in 2026 and 500,000 barrels a day in 2027.
Write to Will Horner at william.horner@wsj.com
This story originally appeared on Marketwatch
